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Children, Medicaid and Psychiatric Services

Published: 2012-12-02 - Updated: 2021-06-23
Author: Thomas C. Weiss - Contact: Contact Details
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Synopsis: Children who experience significant forms of psychiatric disabilities may have needs that require services and supports that go beyond their family members abilities to meet. The States in America have several different options to choose from in their Medicaid State plans to pay for inpatient psychiatric facility benefits. Historically, the Centers for Medicare and Medicaid Services (CMS) has prohibited States in America from claiming expenditures under the inpatient psychiatric facility benefit unless they were made to qualified providers of those services.

Main Digest

Families benefit from long-term supports that are coordinated with other systems and support children with disabilities, are flexible enough to meet the needs of family members, are timely and prevent crisis situations. Sadly, for many families, access to adequate services and supports compromise their quality of life and make it hard and sometimes impossible for them to care for their children, work and keep the family intact.


Under section 1905 (a) of the Social Security Act or, 'the Act,' a general prohibition exists related to Medicaid and payment for any services that are provided to any person who is younger than 65 years of age and who is living in an, 'Institution for Mental Diseases (IMD)' unless the payment is for inpatient psychiatric hospital services for people who are under the age of 21 in accordance with section 1905 (a)(16) of the Act as it is defined by section 1905 (h).

Implementation of regulations at 42 Code of Federal Regulation 440.160 and 441 Subpart D defines these inpatient services for people under the age of 21 as ones being provided by a psychiatric hospital, a general hospital with a psychiatric program that meets the applicable conditions of participation, or an accredited psychiatric facility that meets particular requirements. What this means is the requirements need to include services that have to be provided under the direction of a physician, pursuant to a certification of need and a plan of care that has been developed by an interdisciplinary team of professionals. The services must also involve, 'active treatment,' that is designed with the goal of achieving the child's discharge from inpatient status as early as possible.

Historically, the Centers for Medicare and Medicaid Services (CMS) has prohibited States in America from claiming expenditures under the inpatient psychiatric facility benefit unless they were made to qualified providers of those services. The effect has been one of denying coverage of other medically needed Medicaid services and items as well, such as prescription medications or the services of practitioners that were not included by the State as a portion of the rate paid to a facility for a child's care. Services and items would be available under other benefit categories for people who did not live in an IMD such as the benefit for Early and Periodic Screening, Diagnostic and Treatment (SPSDT). States had separate payment methods for services and items like these.

Interestingly, a number of Department Appeals Board decisions have clarified that other covered services can be furnished as a portion of the inpatient psychiatric facility benefit - even when:

In other words, the Department Appeals Board has indicated that payment for these services do not need to be, 'bundled,' into a single per diem rate for an IMD facility, but may be authorized under the approved State plan and can be paid directly to the treating practitioner. Due to these decisions, CMS is applying the flexibility of payment in its approval of State Plan amendments and seeking to clarify the abilities States have in covering and paying for benefits children receive related to the inpatient psychiatric facility benefit.

Children's Psychiatric Services Provided under Arrangement

The inpatient psychiatric facility benefits is partially defined to include a needs assessment and the development of a plan of care that is specifically meant to meet a child's:

Needs and in some instances, a psychiatric facility might want to obtain services that are reflected in the child's plan of care under arrangement with non-facility providers who are qualified. The services would be components of the inpatient psychiatric facility benefit when they are included in the child's inpatient psychiatric plan of care and are furnished by a provider who is qualified and has entered into a contract with the inpatient psychiatric facility to provide the services to inpatients.

In order to comply with the requirement that services are, 'provided by,' a qualified psychiatric facility, the facility needs to arrange for and oversee the provision of all services, maintain all medical records of care being provided to people, and has to ensure that all of the services are provided under the direction of a physician. Services that are provided under arrangement do not have to be provided at the facility itself if all of the conditions are being met.

Payment for Children's Psychiatric Services Provided under Arrangement

The States in America have several different options to choose from in their Medicaid State plans to pay for inpatient psychiatric facility benefits. Traditionally, a number of States make a direct payment to the facility itself through either an all-inclusive per diem rate, or a base per diem rate with add-on payments. Through this direct payment method, if a facility obtains services provided under arrangement with outside providers, the facility would then be responsible for paying outside providers for their services.

An option that might provide more flexibility has been approved in State Plan amendments. The option is to directly reimburse individual suppliers or practitioners of arranged services using payment means that are applicable when the services would otherwise be available under the State plan. States that choose to pursue this option would pay the same fees to suppliers or practitioners as would otherwise be applied when the services are provided to Medicaid beneficiaries outside of an inpatient psychiatric facility benefit.

The option would allow States increased ability to capture potential efficiencies and monitor the quality of care being provided through the use of billing and delivery processes that already exist. States that choose to make separate payments using this option need to assure there is no duplication of payment between an inpatient facility rate and the items being paid for separately using existing State plan fees. It is also important to note that even though the State might directly reimburse individual providers, CMS requires expenditures for all services provided to people who receive them through inpatient psychiatric facilities to be reported and claimed on the, 'Mental Health Facility Services,' line of the CMS 64 form and not under the line item that applies to the Medicaid service.

Author Credentials:

Thomas C. Weiss is a researcher and editor for Disabled World. Thomas attended college and university courses earning a Masters, Bachelors and two Associate degrees, as well as pursing Disability Studies. As a Nursing Assistant Thomas has assisted people from a variety of racial, religious, gender, class, and age groups by providing care for people with all forms of disabilities from Multiple Sclerosis to Parkinson's; para and quadriplegia to Spina Bifida.

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Cite This Page (APA): Thomas C. Weiss. (2012, December 2). Children, Medicaid and Psychiatric Services. Disabled World. Retrieved September 22, 2023 from

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